Defined Contribution Pensions: Plan Rules, Participant Decisions, and the Path of Least Resistance

James Choi, David Laibson, Brigitte Madrian and Andrew Metrick

No 8655, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We assess the impact on savings behavior of several different 401(k) plan features, including automatic enrollment, automatic cash distributions, employer matching provisions, eligibility requirements, investment options, and financial education. We also present new survey evidence on individual savings adequacy. Many of our conclusions are based on an analysis of micro-level administrative data on the 401(k) savings behavior of employees in several large corporations that implemented changes in their 401(k) plan design. Our analysis identifies a key behavioral principle that should partially guide the design of 401(k) plans: employees often follow 'the path of least resistance.' For better or for worse, plan administrators can manipulate the path of least resistance to powerfully influence the savings and investment choices of their employees.

JEL-codes: H55 J32 (search for similar items in EconPapers)
Date: 2001-12
New Economics Papers: this item is included in nep-pbe
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Citations: View citations in EconPapers (53)

Published as Poterba, James (ed.) Tax Policy and the Economy 16. 2002.

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Working Paper: Defined Contribution Pensions: Plan Rules, Participant Decisions, and the Path of Least Resistance (2002)
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